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Duo of Diabetes Drug Deals Make J&J Better

Licensing deals add to its diabetes franchise.

In the middle of a moribund market, Johnson & Johnson(NYSE: JNJ) boosted its potential diabetes treatment franchise yesterday with a pair of licensing deals. They look like nice additions for the diversified health-care giant.

The first deal was for a phase 3 drug from Diamyd Medical. Apparently, the Swedish company liked its own name, because it named the drug Diamyd as well. The drug protects the immune system from attacking beta cells in type 1 patients, thereby slowing the disease progression.

Type 1 diabetes is less common than type 2, but for only $45 million up front, Johnson & Johnson doesn't seem to be paying too much for the drug. It'll share development costs with Diamyd, but has the option of taking over development after seeing the first phase 3 trial results in the first half of next year. Johnson & Johnson could pay up to $580 million in milestone payments if the drug works.

The second licensing deal that Johnson & Johnson struck yesterday was definitely for diabetes drugs, but given the terse press release, it's hard to say much more. The deal was for "several" preclinical compounds developed by Metabolex. The drugs treat "type 2 diabetes and other disorders." Johnson & Johnson is on the hook for "development, regulatory, and commercial milestones up to $330 million," but the companies didn't break out how much was allocated to each. Oh, and there's an (unknown) up-front payment, too.

The vagueness of the press release is understandable, given the early stage of the development -- no need to tip off potential competitors -- but it does make it hard to know if Johnson & Johnson got a good deal.

I like the push that Johnson & Johnson is making further into the diabetes market. The company has always been a strong player in the glucose testing market with its Lifescan OneTouch meters, and it's working on an insulin pump with an integrated glucose monitor that it plans to submit for regulatory approval this year